Proactive Accountant

Is Your Accountant Proactive or Reactive?

When you own a business, there are many aspects of your business where you will want to be proactive vs. reactive.  For example, you may be proactive in managing your monthly cash flow, or you may be reactive when you run out of money!  Reactive business strategies are those that respond to some unanticipated event only after it occurs, while proactive strategies are designed to anticipate possible challenges.  At Emerald Financial Partners, we believe that the accounting of your business should always have a proactive element.  In this article, we’ll discuss some of the ways you can determine if your accountant is proactive or reactive, and why it matters.

By definition, the word proactive is, “creating or controlling a situation by causing something to happen rather than responding to it after it has happened.”  What does this all of this mean when it comes to accounting?

A reactive accountant addresses issues after they’ve happened and, in some cases, performs routine crisis management.  Most frequently, the accountant is dealing with numbers as a historical event; that is, the income and expenses that have already happened.  They respond to client’s needs, but only after something else has caused a concern to arise.  At tax time, they put numbers in boxes, perform calculations and provide a synopsis of what could be changed going forward, based on this history.  This is reactive accounting.

A proactive accountant, on the other hand, is working side by side with the owner, collaboratively to help them grow their business and position their business for profitability, tax savings, etc.  A proactive accountant addresses the client’s needs before they become urgent issues.

In 2018, the difference between a proactive accountant and a reactive accountant was never more obvious.  With all of the tax changes affecting small businesses, a proactive accountant, like Emerald Financial Partners, suggested a review with their clients to ensure that the business was pivoting to take advantage of new tax benefits before year end.  Some of the ideas we reviewed with our clients included:

  • Whether their business was categorized under the proper entity based on new tax laws,
  • Would be impacted by the new Qualified Business Income deduction,
  • That the salary calculations and requirements for business owners was being met

In addition, we meet with clients regularly and advise them on ways to grow their business.  Is your accountant:

  • Focused on real-time tax planning or just a once a year look-back?
  • Knowledgeable about your specific industry and/or challenges? Able to make recommendations, based on this knowledge, about ways to grow your business or increase profitability?
  • Providing ideas to save you taxes for the coming year?
  • Aware of your business goals and providing regular guidance and feedback to help you reach those goals?

As a business owner, the difference between a proactive or reactive accountant could mean the difference between success and failure.  Are you working with a proactive accountant?  If you’re not sure, contact Emerald Financial Partners and we’ll get you and your business on the right path.

Businesses: Get Accounting Advice Before 12/31

Each year, we help our business clients review their business and tax changes.  This year, though, it is more important than ever to meet with your accountant!

According to a recent article from ABC News, "it's particularly important [this year] because of the law enacted nearly a year ago.  Owners who don't have regular conversations with tax advisers may not understand the changes, many of which are significant and complex."

If you haven't met with your Accountant, or they haven't asked for a meeting with you, WHY?

Here are a couple questions you need to ask about:

  • The Small Business Deduction
  • Should You Incorporate?
  • Can You Deduct Entertainment?
  • Are There Cost Reductions for Your Industry or Small Business?

You can't correct some of these issues after 12/31/18, so it's really important to review and discuss the tax implications while there is still time to make needed changes.

If you need help, contact us today!

Women-Owned Small Business and Government Contracting

The US Small Business Administration has programs specifically designed to help women-owned businesses prepare their organizations to do business with the federal government.  As a matter of fact, the federal government’s goal is to award at least 5% of all federal contracting dollars to women-owned small businesses each year.  In this article, we’ll uncover some of the resources you can use to get your business qualified as a women-owned small businesses (WOSB).

Starting a Business

If you need help starting your business, Emerald Financial Partners has a Business Start-Up program that may be able to assist you with:

  • Discovery – The discovery session will help validate the business idea and review the pre-requisites for launch.
  • Business Plan – Help you create a documented success plan for your business.
  • Structure - Determine which business entity (LLC, S-Corp, C-Corp, Sole Proprietor, etc.) gives you the most benefit from both a liability and tax perspective.
  • Set Up - We'll help you file for entity formation, register with the State, obtain a Federal Tax ID number and more!
  • Accounting System - We'll help you choose the accounting system you need to understand how your business is running and prepare documents you need for fundraising or bank loans.

Eligibility Requirements

Once your business is up and running, you’ll need to determine if you meet the eligibility reuqirements for women-owned small businesses (WOSB).  According to the SBA.gov, “your business must:

  • Be a small business, as defined by the Federal Government
  • Be at least 51% owned and controlled by women who are U.S. citizens
  • Have women manage day-to-day operations and also make long-term decision”

Here are some of the steps you’ll need to take to get started with the Women-Owned Small Businesses (WOSB) program.

  1. Set up a profile at the gov website.
  2. Get self-certified or third-party certified. You should use the SBA.gov website.
    1. You can self-certify by answering questions and uploading documents.
    2. Third party certification can be provided by one of the following organizations:

     

    1. Once you’ve been certified, be sure to update your profile on Sam.gov. This shows contracting offers that your business is in the WOSB program.
    2. You’ll need to annually update your certification information to maintain your status in the program.

    There are additional opportunities for economically disadvantaged women-owned small businesses (EDWOSB).   We’ll review this more in a future article.

    If you need help starting a women-owned business, or preparing your business for federal contracting, contact Emerald Financial Partners.  We are a woman-owned business and have 38 years of practical business experience to share with you!
     

For more information, visit our Women-Owned Small Business page!

What You Need to Know About Government Contract Accounting

In Maryland, we are fortunate to have the geographic location that provides many government contractors with direct access to our Federal government and associated contracts. But, to be a successful government contractor, you will likely need to engage a knowledgeable accounting partner to assist you with Defense Contract Audit Agency (DCAA) compliance services, and help you follow specific guidelines, particularly as it relates to government contract accounting. Here are just a few items that your business needs to consider, when it comes to government contract accounting:

  • Quickbooks
    • Ensure that QuickBooks is set up and compliant with the Federal Acquisition Regulations (FAR)
    • Ongoing compliance checks and troubleshooting
  • A pre-award accounting system survey and post-award system audits
  • Staff training to maintain and resolve ongoing compliance issues
  • Compilation of financial statements for GAAP and DCAA compliance
  • Proper classification of direct and indirect costs
  • Audits and reviews of financial statements to meet government contract or outside party requirements
  • Government contract cost analysis
  • Preparation of DCAA audits
  • Ongoing consulting support to ensure competitively priced proposals and government contract accounting compliance

These are just a few of the items you need to consider.  The guidelines change and there is a lot of information and compliance issues your company will be responsible for.  Most of our clients find that these tasks are much easier to outsource and generally provide better compliance for audits.

Emerald Financial Partners has nearly 40 years of accounting experience and a large portion of our client base is government contractors, with a large portion of those clients focused on IT (Information Technology) contracts.

Contact Emerald Financial Partners today for a free business consultation!

What You Need to Know About Net Operating Loss Tax Changes

The 2018 tax reform made many good changes in the tax law for the small-business owner. But the changes to the net operating loss (NOL) deduction rules are not necessarily in the good-changes category. They are designed to put money in the IRS’s pocket.

OLD Net Operating Loss Rules

You have an NOL when your business deductions exceed your business income in a taxable year. Before tax reform, you could carry back the NOL to prior tax years and get refunds of taxes paid in those prior years.

Alternatively, you could have elected to waive the NOL carryback and instead carry forward the NOL to offset some or all of your taxable income in future tax years.

NEW Net Operating Loss Rules

Tax reform made two key changes to the Net Operating Loss rules:

  1. You can no longer carry back the NOL (except for certain qualified farming losses).
  2. Your NOL carryforward can offset only up to 80 percent of your taxable income in a tax year.

The changes put more money in the IRS’s pocket by

  • Eliminating your ability to get an immediate tax benefit from your NOL carryback, and
  • Delaying your ability to get tax benefits from future NOL carryforwards.

We are bringing the NOL rules to your attention in case you need to do some planning.

At Emerald Financial Partners, we have some strategies that may help you realize some immediate benefits from your business loss.

How Will Recent Tax Law Changes Affect Your 2018 Return?

Now is a good time to start preparing for the 2019 tax season so you won't be surprised with tax bills when the new year rolls around.  This year, it's even more important to review your situation with the new tax-law changes.  One thing you can do to ensure that your taxes will be in order is to schedule a consultation with Emerald Financial Partners now.  We offer Top Rated Local® tax services for individuals and businesses in Maryland.  Whether you’re interested in personal tax preparation or small business accounting and tax services, we can help!

Are You Withholding the Too Much or Too Little?

Earlier this year, IRS officials updated their withholding tables and issued a new Form W-4 for 2018 after passage of the Tax Cuts and Jobs Act last December. The act reduced employees' income tax rates, adjusted tax brackets and eliminated personal exemptions, among other changes.  The Treasury Department, which includes the IRS, "may make more significant changes to withholding in 2019 given its new discretion over the withholding structure provided in the Tax Cuts and Jobs Act," the GAO noted in a July report.

"It's important every year for people to review if they're having the right amount of tax withheld from their paychecks," acting IRS Commissioner David Kautter said in April. "This year, it's even more urgent for people to review their situation following the new tax-law changes."

"Many taxpayers have preferences about the tax refund that they will receive or the balance they will have to pay when they file their tax returns," the GAO report stated. "The tax withholding tables that Treasury and IRS update each year are an important tool that both employers and employees rely upon to form their expectations."

Will Your Income Change During the 4th Quarter?

Are you expecting a large year end bonus?  Are you changing jobs?  Any dramatic changes in income during the 4th quarter can impact your tax liability.  Schedule a consultation with the experts at Emerald Financial Partners today, so that you can prepare for your tax liability in April 2019.  It's better to be prepared than to be caught off guard!

Unreimbursed Employee Expenses

One of the biggest changes under the new tax law changes was the elimination of the deduction for unreimbursed employee business expenses, beginning with 2018 tax returns. This means that employees will no longer be able to offset their taxable income by common business expenses they may incur.  This can have a dramatic impact on your taxable income.  You may want to change your spending, talk with your employer, or plan for a larger taxable income.  The experts at Emerald Financial Partners can provide sound advice for your unique situation.

Don't Wait!

Don't wait until the New Year to evaluate your 2019 tax situation.  Schedule a consultation with the experts at Emerald Financial Partners.  

Emerald Financial Partners believes you should have a trusted partner, on call, to support you through the financial decisions that impact your life, your family, and your business. We provide a holistic approach to your tax, accounting, and financial needs.  Our team goes above and beyond to understand your unique needs and create strategies that will help you reach your goals.   Our services are structured to provide you unlimited access and on-call support to help you make better financial decisions, every day.

Qualitax Becomes Emerald Financial Partners

For Immediate Release

It’s an exciting time here at Qualitax and I wanted you to be among the first to know!  Over the next few weeks and months, you’ll notice that Qualitax will now become Emerald Financial Partners.

For the past 38 years, you’ve come to expect the best tax and accounting service in the area.  That’s not changing at all.  In fact, what we heard from many of our customers is that you want more than just a tax advisor.  So, our new brand reflects our ability to offer a more holistic approach to all of your tax, accounting, and financial needs.  Our new mission is also a reflection of those goals:

Emerald Financial Partners believes you should have a trusted partner, on call, to support you through the financial decisions that impact your life, your family, and your business. Our team goes above and beyond to understand your unique needs and create strategies that will help you reach your goals.   Our services are structured to provide you unlimited access and on-call support to help you make better financial decisions, every day.

This rebranding initiative reflects countless hours of thoughtful discussion about how we can provide a wider array of meaningful services to you, our valued clients.   For our business clients, we are expanding our Accounting & Remote CFO services.  Be sure to download a copy of our Business Services Matrix from our website to see the full suite of business services we now offer.   For our expanding base of Millennial clientele, I encourage you to check out our new Personal Success Package.  It’s a smart way to make better financial decisions, every day.

Our location and telephone will remain the same, so you will still reach us as you always have.  We will be getting new email addresses, but the old email will still work too!  Our old website will remain for the next year or so, but I encourage you to visit our new website at:  www.EmeraldFinancialPartners.com

We’re incredibly proud of the work that we do and thankful for the employees, clients, and partnerships that have accompanied us in our growth.   As always, please don’t hesitate to reach out if you have questions.

Good News for S-Corps

Tax reform gives you a new 20% Section 199A deduction on pass-through income.  But be aware the IRS requires that you pay yourself "reasonable compensation." If you don't, you can torpedo your deductions and be forced to pay extra taxes and penalties.  Here are 3 tips:

Reasonable Compensation.

Paying yourself "reasonable compensation" is so important. Reasonable compensation is generally considered to be what you'd pay for a third party to perform the services that you provide. If you fail to pay yourself reasonable compensation, the IRS can “recharacterize” your S corporation as wages. This makes you and your corporation liable for all payroll taxes.

Section 199A

Your salary affects your Section 199A deduction. Your W-2 reasonable compensation factors into your Section 199A deduction in two ways. It's important that you fully understand these factors.  To qualify for the full 20% deduction on your qualified business income under new tax code Section 199A, you need defined taxable income equal to or less than $157,500 (single) or $315,000 (married).  If your taxable income is greater than $207,500 (single) or $415,000 (married), you don’t qualifor the Section 199A deduction unless you have wages or property.

Salary Adjustments

Reducing or increasing your salary can be dangerous. Both strategies come with significant risks. What you should want to pay yourself is a Goldilocks salary. Not too much. Not too little.  Creating the 'reasonable salary' gives you two benefits:

  • A savings on your self-employment taxes
  • A Section 199A deduction

Summary

The new 20% deduction on qualified business income gives high earners who

  • are not in the out-of-favor specified service trades or business groups (doctors, lawyers, accountants, athetes, etc.),
  • pay little or no wages, and
  • own little or no depreciable property

an additional reason to switch to an S-Corp as their operating entity.

To find out how this would work for your unique situation, contact us for a Business Entity Analysis.  We'll work up all the numbers and give you the best options for you!

3 Reasons Your Business Needs a Strong Financial Partner

Whether you are a new business start-up or a business with years of history, the most important aspect of your business is the financials. Many business owners burn out because they try to wear too many hats or just don’t have the time or expertise to properly manage their finances. In this article, we’ll discuss the value of having a strong financial partner to handle the small business accounting, tax, and financial needs of your business.

Rule #1: Engage a Financial Partner Early in Your Business

When you start your business, a strong financial partner, like Emerald Financial Partners, can help ensure that you don’t make common mistakes. Setting up your Quickbooks properly, reconciling bank statements, tracking expenses, and creating a balance sheet are critical elements. If you decide to get a loan, you’ll need to have all of these items in order, and the better organized you are, the higher the likelihood that you’ll get your loan!

Rule #2: Outsource Accounting

As your business grows, you may need additional small business accounting services to manage the financial aspects of your company. Rather than investing in a full-time employee, outsourcing your accounting functions can often provide you with a higher quality of services, redundancy, and access to additional services, as you need them.

Rule #3: Remote CFO

Once your business achieves a certain level of success, you will need the financial expertise that will foster growth and help you strategically plan for the future. The remote CFO platform of small business accounting services that we offer at Emerald Financial Partners is a perfect choice. Our team works with you to oversee:

  • Accounting
  • Payroll and bookkeeping
  • Business financial strategies
  • Track and monitor expenses
  • Increase profitability
  • Streamline accounting systems
  • Provide you with accurate financial statements
  • Full-service accounting and compliance
  • DCAA compliance
  • Unlimited access to financial experts

To learn more about everything that Emerald Financial Partners has to offer you and your business give us a call to schedule a meeting today!

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